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Nearmap share price plunges 30% on FY20 update

Nearmap Ltd (ASX: NEA) saw its share price fall around 30% today after the company announced an update for its FY20 year guidance.

The aerial imaging business didn’t have good news for investors in terms of its full year guidance, although the growth numbers for the FY20 half-year result were pretty solid.

For the period ended 31 December 2019 the company’s closing annualised contract value (ACV) grew by 23% on the prior corresponding period to $96.6 million and unaudited statutory revenue rose by 31% to $46.4 million.

North America

The North American core business – which excludes large enterprise and partnership deals – delivered a 41% increase in ACV on last year, which management said validated the money spent on sales and marketing.

The North American ACV portfolio was US$24.9 million at 31 December 2019, up from US22.7 million at June 2019.

However, there were three negative events. There was a cancellation of a large contract by a partner which was subject to a permanent court injunction and there were two “significant” churn/downgrade events because of a slowdown in mapping for the autonomous vehicle industry, though Nearmap hopes for potential future upside as the industry recovers.

The North American division also failed to close an expected significant partnership deal due to the partner’s budget constraints.

However, Nearmap reminded investors of its acquisition of roof geometry technology and intellectual property from Pushpin to serve roofing and solar industry businesses.  

Australia and New Zealand

In the domestic markets the company ended the period with an ACV portfolio of $61 million compared to $57.9 million at June 2019.

Nearmap also said there was more churn because of consolidated subscriptions, reductions to customer funding and internal execution issues within Nearmap. However, minimal subscriptions were lost to competitors and Nearmap continued to win from competitors.

FY20 guidance change

Nearmap announced at its AGM in November 2019 that it expected ACV at 30 June 2020 to be in the range of $116 million to $120 million. However, Nearmap downgraded its FY20 ACV guidance to $102 million to $110 million because of the churn and deal timing events for major North American customers.

However, the company remains extremely positive for the medium-term and long-term with the fundamentals remaining in-tact and expectations of 20% to 40% ACV growth.

Nearmap ended period with cash of $50 million. The company continues to invest in its AI capabilities which are in beta mode, the move into roofing geometry and it continues to spend money to ensure it has the best camera systems and capture technology.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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